Appalachian Airlines began operating in 2004. The company lost money the first y

Question

Appalachian Airlines began operating in 2004. The company lost money the first year but has been profitable ever since. The companys taxable income (EBT) for its first five years is listed below. Each year the companys corporate tax rate has been 40%. Assume that the company has taken full advantage of the Tax Codes carry-back, carry-forward provisions and that the current provisions were applicable in 2004. How much did the company pay in taxes in 2007?


Taxable income Year
-$4,500,000 2004

$1,000,000 2005

$2,000,000 2006

$3,000,000 2007


$5,000,000 2008

Explanation / Answer

Appalachian Airlines began operating in 2004. The company lost money the first year but has been profitable ever since. The company’s taxable income (EBT) for its first five years is listed below. Each year the company’s corporate tax rate has been 40%. Assume that the company has taken full advantage of the Tax Code’s carry-back, carry-forward provisions and that the current provisions were applicable in 2004. How much did the company pay in taxes in 2007?


Taxable income Year
-$4,500,000 2004

$1,000,000 2005

$2,000,000 2006

$3,000,000 2007


$5,000,000 2008
answer =$ 800,000

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